COMPASSIONATE BANKRUPTCY ANDCONSUMER RIGHTS COUNSEL

Important Information for Clients Filing Chapter 7

The Bankruptcy Code requires you to list all of your debts, assets and sources of income. If you inadvertently leave a creditor off your petition, it can be added by amending the petition to include the debt, provided your case hasn’t been closed by court and the trustee hasn’t made any distributions to creditors. Amendments are ideally done before the close of your bankruptcy case. Because an amendment is an extra action that our office will have to take, there is a charge for this. If the fee to amend your petition is less than the debt, it probably makes sense to amend your petition to include it. If you don’t amend, you will be liable on the debt and your bankruptcy discharge will not protect you from the future collection actions by the creditor. If you realize you left a creditor off your petition after your case is closed, your case can be reopened to add the creditor unless your case was an asset case – meaning the Trustee liquidated assets and paid creditors some amount toward your debts. In these situations, you will be liable for the old debt. There is also a fee to reopen a bankruptcy case once it has been closed.

If I am surrendering real estate that has rental property and tenants still residing in the unit(s), is it okay to still collect the rent?

We strongly discourage our clients from continuing to collect rent from their tenants after they have decided to let you’re their property go back to the lender. In some instances, it may make sense to collect rent, but any rent collected should be used explicitly for upkeep of the building and if you decide to do this, you should keep good records that show you used the rent for this purpose.

When will I receive my reaffirmations?

We request reaffirmation agreements from your creditors as soon as we file your case. It is up to your creditors to send those documents to our office. WE CANNOT FORCE A CREDITOR TO REAFFIRM A DEBT WITH YOU NOR CAN WE FORCE THEM TO SEND US DOCUMENTS NEEDED TO REAFFIRM. We make diligent efforts to follow up with creditors to try to get reaffirmations for our clients wishing to reaffirm, but if a creditor doesn’t cooperate, we have no recourse.

What happens to my responsibility for condominium association fees when I surrender my condo unit?

If you surrender a condominium in your bankruptcy case, you will remain liable for any association fees that accrue after the date of your case filing and up to the date the unit’s ownership changes.

I am expecting a tax refund. Will I get to keep it?

Towards the later part of the year and into the following year, Chapter 7 Trustees ask about tax refunds. If you are owed a tax refund when you file your bankruptcy, it will likely become the property of the bankruptcy estate and you will be required to surrender it to be used as payment to your creditors. Failure to follow the instructions of a trustee who requests your refund can result in your failure to receive a discharge.

Will I be able to maintain my regular relationships with my bank or credit union?

Most credit unions and some banks take it personally when you file bankruptcy. Therefore, if you owe your banking institution any money on the day you file your case, you are wise to find another bank where you can do your financial transactions. Many institutions will not allow you to keep your checking account with them after you file your bankruptcy if you owe them money.

Why am I being served with a Summons and Complaint on my house which I surrendered in the bankruptcy?

Bankruptcy will discharge your obligation to pay mortgages if you surrender the property in your case, but bankruptcy is a federal court action. Foreclosure must occur in the state court. Therefore, even though you surrendered your house in your bankruptcy, the bank still has to go through the state court foreclosure process. That means that you are entitled to be served the legal papers that start the process. If you have surrendered your property and do not want to try to work out some other arrangement other than foreclosure, you do not need to do anything with the summons and complaint. If you do want to try to save your home, you should speak with one of our attorneys.

What happens to my student loan debt?

Your student loan debt will not go away as a result of your bankruptcy. Student loan lenders have no statute of limitations for how long they can seek repayment for these types of debts. Delinquency and default have serious implications and should be avoided if possible. There are ways to rehabilitate student loans in order to get them out of default. Once out of default, borrowers usually qualify for a host of different repayment plans. Our office can help you rehabilitate your loans if they are in default. Please just ask and we will be happy to advise you of your options. Please note, however, that this is a separate service provided by our office and is outside the scope of your bankruptcy retainer.

If you owe debts for your education or your children’s educations, it is very unlikely that you will be able to discharge these obligations in your Chapter 7 case. There is a narrow exception to this, however. The bankruptcy code provides that if repaying your student loans would impose an undue hardship, then they may be dischargeable. These cases are very rare. If you think you might be eligible to discharge your student loans, you should talk with one of our attorneys.

When will I be able to get credit again?

Though we are hopeful that you will be very careful in the future with regard to credit card debts, automobile purchases and mortgages, we are always asked by clients when they can expect to recover from their bankruptcies. Answering the question is complicated because it will depend on a host of things that may be different for each person or business filing. The short answer is that it will take you several months and maybe even years to raise your credit score to a level that will allow you to borrow money again at reasonable rates. Credit is based on several factors, not the least of which is your debt to income ratio. Coming out of bankruptcy, you will have a great income to debt ratio because presumably you will receive a discharge of most if not all of your debt. But debt to income ratio is not the end of it. The fact that you filed a bankruptcy will stay on your credit report for up to ten years. This means that lenders will be able to see your filing for a long time. However, your on time payments of reaffirmed debts can help your credit score. A safe driving record can also help since insurance is in part credit based. Maintaining healthy bank accounts can also help. The long answer is that it could take you several years to fully recover. This doesn’t mean you won’t be able to get credit, but it does mean that you will pay high interest rates for some time into the future.

What happens if my mortgage company or car loan company doesn’t provide a reaffirmation agreement?

Some lenders don’t provide reaffirmation agreements despite our efforts to have them do so. If your lender doesn’t provide one, you can still make payments on the secured property. Once all payments have been made, you will receive a mortgage discharge or the title, if it is a car. Your payments on these things, however, will not be reported to the credit bureaus. If you continue to make your payments, it is very unlikely that the lender will refuse your payments or demand the collateral back from you.

What happens to my income tax debt?

Most tax debt is non-dischargeable. However, to answer particular questions, you should speak with one of our attorneys to determine if your particular tax debt is dischargeable.

Will my bankruptcy affect co-signers?

Your bankruptcy will affect co-signors, but not the same way it will affect you. If you seek to discharge a co-signed debt with someone who is not filing with you, they will become solely liable on the debt. Their credit could be affected as well, though in a minor way.

When will my bankruptcy case be over?

From start to finish, the average bankruptcy case takes about three and a half months. However, depending on the issues in your case, it could take longer.

How long will I have to purchase property back from the Trustee?

If the Trustee allows you to purchase property back from the bankruptcy estate, you will not have a lot of time. The most we are able to negotiate is 1-2 months. If you know you are going to need to do this, please plan accordingly and speak to your attorney.

Molleur Law Office has office locations in Portland, Auburn, and Biddeford, Maine. The founder of Molleur Law Office, James F. Molleur, Esq., is certified as a Specialist in Consumer Bankruptcy Law by the American Board of Certification. Molleur Law Office offers bankruptcy counseling, foreclosure defense, and protection from creditor harassment for individuals & businesses from Bangor down to Kittery Maine, Coastal New Hampshire and Northern Massachusetts. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an actual attorney for individual advice regarding your own situation.